Industrial production grew by 3.2 per cent in October, the government reported on Friday. However, experts feel that the growth has been fragile and did not get much boost from festival demand.
Industrial growth based on Index of Industrial Production (IIP) in September grew by 3.3 per cent. It recorded a growth of 4.5 per cent in October last year.
Commenting on the growth number, Devendra Kumar Pant, Chief Economist with India Ratings & Research (Ind-Ra), said that despite 25.3 per cent growth in GST collection and 7.5 per cent growth in core infrastructure sectors, October’s industrial growth was impacted by the base effect. “The IIP growth has been very fragile and even festive demand was not able to uplift IIP growth in October. A contraction of 6.1 per cent for consumer durable and 0.5 per cent growth in consumer non-durable are testimony of weak demand conditions in the economy,” he said.
Capital goods production down
Worrying trends are also emerging on the investment front with capital goods production declining 1.1 per cent in October. Only primary goods (9 per cent) and infrastructure/construction goods (5.3 per cent) provide some support to growth. Overall industrial output is still below pre-Covid level, 99.6 per cent of February, 2020, he said.
Aditi Nayar, Chief Economist with ICRA termed the growth as stable yet tepid with the festive season boost being negated by the supply side issues afflicting the auto sector, as well as a higher base. The disaggregated data does not provide convincing signals of the recovery becoming durable and broad-basing further, with capital goods and consumer durables reporting a YoY (Year-on-Year) contraction in October. Even as the ongoing supply challenges in the auto sector persisted, the YoY performance of several other high frequency indicators deteriorated in November, including electricity demand, GST e-way bills, port cargo traffic etc. suggesting that economic activity lost steam after the festive season ended, with a satiation of pent-up demand.
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Accordingly, “the IIP growth may print sub-3 per cent in the just-concluded month, in spite of the low base (-1.6 per cent in November),” she said.
Pant felt that industrial output is likely to follow the same trend as observed in periodic labour force survey and weak private final consumption expenditure depicted in 2QFY22 GDP numbers. “Omicron could be a disruptor in coming months. Expect a weak set of IIP numbers in rest of FY22,” he said.